11:30AM Market averages turned higher, helped by deal news.
Stock markets were lackluster Monday, as several takeover deals generated positive mood, but cautiousness ahead of interest-rate decision Tuesday and weaker oil limited the gains. While the Fed is widely expected to leave rates unchanged, traders are worried what will be said in the accompanying statement.

Metals stocks advanced after hedge fund SAC Capital Advisors LLC bought a stake in mining company Phelps Dodge Corp. (PD: chart), and said it would oppose the company's planned takeover by Freeport-McMoRan Copper & Gold Inc. Among rising stocks, Biomet (BMET: chart) rose 4.1% on a report that Smith & Nephew might bid $11 billion to buy the medical device maker. Sabre (TSG: chart) jumped 7.7% on deal talk.Time Warner Inc. (TWX: chart) hit multiyear highs after it was upgraded by Prudential Securities, citing strong potential for improvement at the media conglomerate's cable division. Shares rose 1.3%. Harrah's Entertainment (HET: chart) advanced on several buyout offers. The casino operator received one from private equity firms Apollo Management and Texas Pacific Group, and Penn National Gaming Inc. and hedge fund D.E. Shaw are also said to be considering an offer.

The biggest drag on the Nasdaq was drugmaker Nuvelo (NUVO: chart) which tumbled nearly 82% after the company and German drugmaker Bayer said a Phase 3 clinical trial of a blood clot dissolver failed to meet its main goal. In late morning trading, the Dow Jones industrial average rose 26.19, or 0.21%, to 12,333.68. The S&P 500 index rose 3.58, or 0.25%, to 1,413.42, and the Nasdaq composite index was up 11.93, or 0.49%, at 2,449.29. Bonds rose, with the yield on the benchmark 10-year Treasury note falling to 4.52% from 4.55% late Friday.


10:30AM The Sensex declines on RBI move to tighten monetary policy.
The Sensex on BSE lost 400.06 points, or 2.9%, to end at 13,399.43. The market-breadth was rather weak. As 1,974 shares declined, 589 advanced and 43 shares were unchanged. From the Sensex stocks, 25 stocks declined, the rest advanced. The turnover on BSE was Rs 4,830 crore, much higher than Rs 4,148 crore on Friday. On NSE, the turnover today was Rs 9,344.45 crore, higher than Rs 7,556.04 crore on Friday.

Economic news

On Friday, the RBI had rasied the rates in cash reserve ratio, which is the amount of assets that all banks must deposit with the central bank, by 50 basis points to absorb Rs 13,500 crore from the system.

Finance Minister P Chidambaram expressed his confidence that bank stocks will adjust to new RBI guidelines and today’s market drop is not a long term concern.

Most-active stocks

Reliance Communications was the most-active stock with a turnover of Rs 409 crore followed by Indiabulls, Reliance Industries, Tata Steel and SBI.

Decliners

That banks will raise lending and deposit rates in he wake of RBI move weighed down bank stocks. SBI plummeted 9% to Rs 1,230, ICICI Bank dipped 7% to Rs 814, and HDFC Bank was off 5.3% to Rs 1,027. Reliance Industries shed 3.2% to Rs 1,227.

Cellular service providers fell under selling pressure. Bharti Airtel was down 4.9% to Rs 602 and Reliance Communications lost 4.6% to Rs 426.70.

Tata Steel declined 6.7% to Rs 460. In response to the CSN bid Tata Steel announced Monday, it was reconsidering its position on Corus. CSN today proposed a bid for Corus that outbid Tata’s. Cement large-cap ACC took a dip, sinking 6.8% to Rs 1,029.50, and NTPC lost 6.5% to Rs 141.65.

Infosys was 0.6% lower to Rs 2,182 in volatile trade. The company is renewing a few of its contracts at a premium. The stock has been included in the Nasdaq 100 index.

Zee Telefilms declined 8.7% to Rs 316.45, after ESPN-Star, a joint venture of Walt Disney Co and News Corp, got the broadcast rights for International Cricket Council matches.

L&T shed 1.3% to Rs 1,431.50. L&T has secured a Rs 5,400 crore contract from GMR Infrastructure, to design and construct the terminal and airport runway at New Delhi airport. Oil explorer ONGC was down 0.4% to Rs 837.

Advancers

Budget airline SpiceJet surged 8.7% to Rs 58.10, after Tata group on Monday announced it had bought less than 10% stake in the company as a purely financial investment.

Satyam gained 0.78% to Rs 460.25, Cipla moved 0.61% higher to Rs 248, TCS added 0.37% to Rs 1,180.55 and ONGC advanced 0.23% to 842.45.